Tuesday, 25 June 2024

DBP and LandBank merger scrapped

5 min read

By Genivi Factao

Opting against merging DBP and LandBank emphasises their distinct roles and the importance of individual development for comprehensive economic growth, benefiting all sectors.

  • DBP and LandBank are not merging
  • The two entities serve as Maharlika Investment Fund depository banks
  • Amending charter to bolster financial capabilities and market expansion

The Development Bank of the Philippines (DBP) and LandBank of the Philippines are affirming their distinct roles in national development and agricultural support, opting not to merge, and reinforcing the necessity of maintaining separate government depository banks for the Maharlika Investment Fund (MIF).

Despite previous advocacy for the merger by former finance secretary Benjamin Diokno, the focus is now on maintaining the separate roles of DBP and LandBank.

Ralph Recto, Secretary, Department of Finance

Finance secretary Ralph G Recto said: “We need two government depository banks, and two members in the Maharlika board. Their mandates are different so I think we’re better off with two of them. I don’t think there’s a resolution merging them.”

DBP and LandBank serve as MIF depository banks

MIF, managed by the Maharlika Investment Corporation (MIC), targets economic development across various sectors, including infrastructure, energy, and tourism. 

Led by president and CEO Rafael Jose D Consing, Jr, the MIC has restructured committees and appointed DBP and Landbank as depository banks, aligning with the Department of Finance (DOF) regulations. This partnership aims to optimise financial management and streamline fund operations, reinforcing a commitment to sustainable growth and regulatory compliance.

Charter amendments

The DOF is considering amending the charters of LandBank and DBP and has prepared a draft bill.

Recto said: “We are exploring the amendments to the charters of LandBank and DBP, including their possible public listing, to broaden the local capital market.”

Michael de Jesus, President and CEO, Development Bank of the Philippines

DBP President and CEO Michael O. de Jesus said the proposed amendments seek to increase DBP’s authorised capital stock to PHP 300 billion ($5.1 billion) from PHP 35 billion ($606 million), aligning with market demands and enhancing the bank’s capacity to finance development projects.

De Jesus said several bills have been filed and pending in the Committee on Banks and Financial Intermediaries of the House of Representatives, while a similar version is expected to be filed in the Senate.

De Jesus said: “We are working hand-in-hand with all stakeholders especially the DOF in ensuring that DBP would be able to finance more developmental projects especially in the countryside. These amendments are needed to boost our financial position and make the bank responsive to the evolving needs of our clients.”

He said the proposed changes would allow DBP to engage in traditional and non-traditional modes of financing businesses while enhancing its compliance with risk-based banking laws and regulations.

Lynette V. Ortiz, President and CEO,
Land Bank of the Philippines

Similarly, LandBank, led by president and CEO Lynette V Ortiz, continues its commitment to financial inclusion and sustainable development. The bank achieved significant growth in digital transactions and reported record-breaking net income in 2023.

LandBank, the largest development financial institution in the Philippines, reported a staggering 42% growth in digital transactions, amounting to PHP 8.8 trillion ($152 billion) in 2023. This surge, facilitated by the bank’s robust digital channels, underscores LandBank’s dedication to serving the nation by providing accessible and affordable financial support to Filipinos.

Alongside its digital transformation, LandBank achieved another milestone with an unprecedented net income of PHP 40.3 billion ($696 million) in 2023. 

Ortiz said: “LandBank’s strong financial performance in 2023 exemplifies sound management committed to deliver remarkable results in a thriving economy. We will build on this growth momentum to further drive meaningful investments in advancing inclusive and sustainable development in the country.”

The merger that was previously approved by President Ferdinand R Marcos Jr, was expected to result in a stronger bank with total assets of around PHP 4.18 trillion  ($72 billion), a deposit base of about PHP 3.59 trillion ($62 billion), according to 31 December 2022 figures, and savings for the government of around PHP 975 million ($16.8 million) annually.

The savings were seen to come from the consolidation of the banks’ branches, with DBP being folded into LandBank. 

Bruce Tolentino, member of the policy-making Monetary Board had favoured the planned consolidation of the two banks after noting that Philippine banks, even the major ones, are smaller compared to their counterparts in some countries in the region. He said: “Our banks are really small. There’s some rationale for having much larger banks, stronger banks.”  

Keywords: Economic Growth, Maharlika Investment Fund, Depository Banks, Charter Amendments, Finance, Public Listing, Financial Capabilities, Market Expansion, Regulations, Sustainable Growth, Regulatory Bill, Authorised Capital Stock, Digital Transactons, Financial Institutions, Savings, Branches, Merger, DBP-LandBank Merger
Institution: Development Bank Of The Philippines, LandBank Of The Philippines, Maharlika Investment Corporation, Department Of Finance, House Of Representatives, Senate
Country: Philippines
Region: South East Asia
People: Ralph G Recto, Michael O De Jesus, Lynette V Ortiz, Rafael Jose D Consing, Jr, Bruce Tolentino
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